Global data center projects are hitting roadblocks due to power shortages, cooling system needs, and supply chain delays. Bernstein analysts warn that up to 40% of planned capacity faces risks of cancellation or deferral. For investors, this shift highlights the importance of companies that already have secured power and land, while project timelines remain uncertain for others.
The global data center sector is experiencing a significant shift as rapid expansion plans collide with physical and logistical constraints. According to a recent analysis by Bernstein, the industry faces a period of project delays and cancellations that is expected to persist through 2027. The core issue is no longer a lack of investment or capital, but a severe shortage of the physical infrastructure required to support high-performance computing, particularly for AI workloads.
Infrastructure Hurdles and Power Constraints
The primary bottleneck identified is power availability. In key global markets, utility interconnection queues—the waiting time to connect new facilities to the electrical grid—have extended to three or four years. Because data centers require massive, reliable power supplies, the inability to secure grid connections is forcing many operators to reconsider or scrap their planned sites. This is compounded by the need for advanced cooling systems, as newer, more powerful AI servers generate significant heat that standard facilities cannot manage efficiently.
Impact of Rising Construction Costs
Beyond power and cooling, the cost of building these facilities has increased substantially. Bernstein estimates that construction costs per megawatt have risen by 20% to 25% since 2023. This jump is largely due to higher prices for essential electrical components, such as high-voltage transformers and switchgear, along with rising costs for steel and specialized construction labor.
Supply chain issues remain a critical concern, with lead times for major electrical equipment currently stretching between 80 and 100 weeks. These long wait times mean that even if a developer solves a local power issue, the project cannot be completed or brought online until specialized equipment is delivered and installed.
Investor Implications and Sector Outlook
While the long-term demand for data processing remains high, the current environment is leading to a bifurcation in the sector. Investors may need to distinguish between companies that have already secured essential resources like power allocations and land, and those that are still in the early planning stages or waiting for utility approvals.
The companies most exposed to these risks are those that cannot guarantee their project timelines, which may lead to asset write-downs or reduced profitability if projects are canceled. Conversely, companies providing liquid cooling technology and advanced power distribution equipment are positioned differently, as they remain central to building the next generation of data infrastructure. The market will likely focus on project execution and the ability of operators to successfully bring new capacity online despite these systemic constraints. The next phase for the industry will depend on whether new power infrastructure can be built fast enough to meet the demand post-2027.